They are invisible to the end-users of the payment schemes, yet they are indispensable in transferring money from one account to another when two different are involved.
PSPs participating in the SEPA schemes have to choose a CSM in order to comply with the reachability requirements of the schemes.
To understand clearing and settlement mechanisms, imagine John, who wishes to transfer money from his account to another person, Anna. This example would also work for any kind of user – a business, a public body, and so on. The two people can either be located in the same country or in two different countries, and in our example they hold payment accounts with different . If John holds sufficient funds in his account, the money is moved to Anna’s account. Behind the scenes, John’s , which we will call ‘PSP A’ sends a message to a ‘clearing’ system (a company specialising in this activity) asking to move this money to Anna’s PSP, ‘PSP B’. This clearing company aggregates all orders for transactions to other PSPs received from PSP A during a given number of hours, as well as orders for transactions received from its other PSP customers (like PSP B) and intended for other PSPs, including PSP A.
The clearing company is then able to ‘net’ the orders: in our simple example, the gross amount of transfers towards B is compared to the amount of transfers towards PSP A (this is the ‘netting’). The net amount of money to be moved from one of the to the other (the final position) is then transferred. This last step is the ‘settlement’ of the transaction: it is now complete, and discharges the obligation of the PSP with a net debit position towards the PSP with a net credit position.
In other words, clearing is defined by the European Central Bank as “the process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and the establishment of final positions for settlement.” The settlement is “the completion of a transaction or of processing with the aim of discharging participants’ obligations through the transfer of funds.”
Services based on the payment schemes and offered by CSM companies are governed by market forces and lie outside the scope of the . There is a clear separation between the EPC as the SEPA scheme manager and CSM organisations. Each CSM organisation can propose its own solution, provided that it is compliant with the rules stated in the EPC schemes.
Each participating in the SEPA schemes freely works with the CSMs of its choice. What matters is that the PSP is reachable.
As soon as a PSP signals its readiness to participate in the EPC SEPA scheme(s), it is obliged to be reachable if it is to receive SEPA transactions. This reachability can be achieved by using one or several of the following options:
- An Automated Clearing House (ACH) that is compliant with a SEPA scheme or schemes. An ACH is a multilateral arrangement based on legislation or private contractual arrangements with multiple memberships, common rules and standardised procedures. The SEPA transactions are cleared and settled among the members of the ACH.
- A decentralised bi- or multilateral clearing and settlement arrangement (i.e. not via an ACH) that is compliant with a scheme or schemes. A clears and settles its SEPA transactions with another PSP directly in an agreed bilateral channel or through third parties (these parties act as correspondent banks).
- An intra-PSP and / or intra-group clearing and settlement arrangement that is compliant with a SEPA scheme or schemes. In this case, the two are branches or subsidiaries within a single PSP entity or within a group of PSPs. They use their respective accounts within that entity or group to clear and settle SEPA transactions.
Any CSM organisation can publicly announce its compliance with an scheme by filing this disclosure letter.
The list below includes all CSM organisations compliant with one or several SEPA schemes:
Companies offering messaging services compliant with the EPC SEPA schemes
Likewise, any company wishing to disclose its intent to offer messaging services to CSMs that support full compliance with the EPC SEPA schemes can file this disclosure letter.
The chart below shows which companies have informed the EPC of their ability to offer such messaging service:
|Overseen by||For the SEPA Credit Transfer scheme||For the SEPA Direct Debit Core scheme||For the SEPA Direct Debit B2B scheme||For the SEPA Instant Credit Transfer scheme|